[Opinion] 2021: The Year Cryptocurrency Matured

Bitcoin (BTC) continues to be the brightest star in the crypto sky with the coin adding over $500 billion to its market capitalisation in 2021, but the crypto asset market truly exploded this year. Crypto assets settled into a steady $1 trillion market price in January, broke $2 trillion in May on its way to a record high of $3 trillion.

Altcoin market share has been on an upward trajectory since 2014, closing 2021 at 62 percent

BTC’s market share, however, has deteriorated steadily since 2014 falling from 78 percent to 38 percent in December 2021. Over the same period Altcoins almost tripled market share from a lowly 21 percent in 2014 to about two thirds (62 percent) at the end of 2021.

A big driver of the Altcoin surge is more advanced blockchains that provide more efficient and cost-effective transfers for users. These coins also offer more usage with many DeFi and asset innovations being brought to market on the underlying technologies.

BTC criticism  

Bitcoin’s environmental impact made many headlines in 2021, with the Chinese government folding crypto mining and its associated energy costs into its sustained crypto crackdown – going as far as to say that crypto mining is limiting the country’s ability to its 2060 reach carbon neutral goals.

While China did have an impact on the BTC price, it was overshadowed by Elon Musk’ twitter account.

South Africa’s prodigal son caused a stir when he tweeted about the Tesla decision to invest $1.5 billion in Bitcoin and that the company would accept BTC payments.

But once the hypocrisy of an EV manufacturer investing in BTC – which has a carbon footprint equivalent to Slovakia – was pointed out, Tesla quickly suspended the crypto payment option. This about-turn caused a seven percent drop in the price, compared to the China crackdown’s five percent downward pressure.

Harder to mine

China did have a major effect on BTC mining, with the hashrate (computing needed per second to mine bitcoin) dropping significantly when the crypto mining farms went dark. The United States is now the hub of BTC mining.

Despite these mining difficulties, BTC closes 2021 with 90 percent of its maximum supply circulating in the market. In December there is over 18 million of the 21 million Bitcoin cap mined. With the current proof of work reward of 6.25 Bitcoin set to be halved to 1.56 in 2024, the remaining supply should only be, realistically, fully mined by 2140.

Over 3 million Bitcoin has been lost to owner death and loss of access to the private key

It is estimated that Bitcoin will become the scarcest asset in the world once the full supply has been mined, which bodes well for long-term, multigenerational investment strategies.

There is, however, the risk of disruption, just as blockchain technology and the associated coins have shaken up the traditional finance. But the outlook for 2022 is optimistic with a never-ending stream of new DeFi solutions and Altcoins coming to market.

Cryptocurrency came of age in 2021 and will continue to mature as an asset class and investment vehicle in the future.

Read more: Friday interview: Matthew Finlayson, Invictus Capital co-founder, Bitvice wants to spread Bitcoin custodianship in South Africa

Featured image by Executium/Unsplash